Question 1

Faith wrote a check for $22 on Friday,May 6.The check cleared the bank on Wednesday,May 11.There were no other checks or deposits outstanding during the month.Given this,which one of the following statements is correct?

Accepted Answer

A)  On May 6, the available balance decreased by $22.
B)  On May 11, the available balance was $22 less than the ledger balance.
C)  On May 12, the ledger balance was $22 less than the available balance.
D)  On May 14, the available balance increased by $22.
E)  On May 10, the ledger balance was $22 less than the available balance.F) A) and B)
G) C) and E)

Question 2

Which one of the following is the process of determining the probability that customers will not pay?

Accepted Answer

A)  Credit analysis
B)  Collection policy
C)  Account aging
D)  Credit terms
E)  Customer invoicingF) A) and C)
G) B) and E)

Question 3

Laurie's Ice Rink keeps an extra $1,500 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?

Accepted Answer

A)  Speculative
B)  Float requirement
C)  Transaction
D)  Precautionary
E)  AvailabilityF) A) and B)
G) C) and E)

Question 4

Which one of the following is the most ethical practice related to cash disbursement management?

Accepted Answer

A)  Intentionally delaying payments by creating a complex accounts payable system
B)  Taking the cash discount but paying after the discount period
C)  Paying a supplier from a zero-balance account
D)  Purposely losing a supplier's invoice and requiring the supplier to submit another copy
E)  Mailing a check from the most remote location possibleF) None of the above
G) A) and E)

Question 5

Which one of the following reports will tell me the percentage of accounts receivable that are delinquent by 90 days or more?

Accepted Answer

A)  Cash budget
B)  5Cs of credit
C)  Credit analysis
D)  Aging schedule
E)  Credit scoring reportF) A) and C)
G) A) and B)

Question 6

On June 22,Roy's Welding Shop purchased $3,300 worth of goods.The terms of the sale were 1/7,net 21.What is the effective annual rate of interest for the credit period for this sale?

Accepted Answer

A)  29.96 percent
B)  31.38 percent
C)  34.42 percent
D)  37.73 percent
E)  38.63 percentF) B) and C)
G) B) and E)

Question 7

Ted's Toys just reconciled its bank account and has $12,300 in outstanding deposits and $31,400 in checks outstanding.The firm's checkbook has a positive balance.The firm sells on a cash basis only and deposits its receipts on a daily basis.The deposited funds are available to the firm the following day.The firm writes and mails checks on a daily basis also.These checks generally clear the bank in three days.What do you know about the firm's float given this information?

Accepted Answer

A)  The firm has disbursements float but no collection float.
B)  The collection float exceeds the disbursement float.
C)  The firm has a net collection float.
D)  The disbursement float exceeds the collection float.
E)  Since transactions occur daily, the firm has no float.F) C) and D)
G) A) and B)

Question 8

What is the primary purpose of a cash discount?

Accepted Answer

A)  Customer compensation for an out-of-stock item
B)  Customer compensation for faulty goods or services
C)  Means of offsetting the interest charges on an account receivable
D)  Inducement to pay promptly
E)  Incentive to purchase a specialty itemF) A) and B)
G) D) and E)

Question 9

Draw a basic flowchart that depicts the components of collection time.Be sure to label all key points and explain the various components.In addition,offer one suggestion for decreasing the time required for each component.

Accepted Answer

Students should replicate the time line ...

Question 10

Tanner Tavern writes four checks a day for an average amount of $5,400 each.These checks generally clear the bank four days after they are written.In addition,the firm generally receives and deposits checks amounting to $18,700 each day.All deposits are available on the next day.What is the firm's net float?

Accepted Answer

A)  Net collection float of $13,200
B)  Net collection float of $18,700
C)  Net collection float of $22,300
D)  Net disbursement float of $67,700
E)  Net disbursement float of $86,400F) C) and D)
G) None of the above

Question 11

Which one of the following refers to a customer's willingness to meet his or her credit obligations?

Accepted Answer

A)  Capital
B)  Conditions
C)  Capacity
D)  Character
E)  CollateralF) B) and E)
G) C) and D)

Question 12

Which one of the following is most commonly used in international trades?

Accepted Answer

A)  Sight draft
B)  Time draft
C)  Commercial paper
D)  Banker's acceptance
E)  Open accountF) C) and E)
G) C) and D)

Question 13

Madison Corner writes 20 checks a day for an average amount of $630 each.These checks generally clear the bank 2.5 days after they are written.In addition,the firm generally receives an average of $18,400 a day in checks.Deposited amounts are available after 2 days.What is the amount of the firm's disbursement float?

Accepted Answer

A)  $12,600
B)  $25,800
C)  $28,350
D)  $29,840
E)  $31,500F) A) and D)
G) All of the above

Question 14

You have $175,000 on deposit with no outstanding checks or uncleared deposits.One day you write a check for $18,000.What is your book balance?

Accepted Answer

A)  $157,000
B)  $158,500
C)  $175,000
D)  $178,500
E)  $189,000F) B) and E)
G) C) and D)

Question 15

On April 14,McCallister's purchased $10,000 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

Accepted Answer

A)  $200; 14.95
B)  $200; 44.59
C)  $400; 14.95
D)  $400; 27.38
E)  $400; 44.59F) D) and E)
G) B) and D)

Question 16

The checks received in a lockbox are deposited:

Accepted Answer

A)  into a local bank and then transferred electronically to a concentration account.
B)  into a local bank and immediately invested in short-term investments.
C)  as soon as they are posted to the customer's account.
D)  the following day and immediately invested.
E)  directly into an investment account.F) A) and B)
G) A) and C)

Question 17

Which of the following practices will reduce a firm's collection float?
I.Installing a lockbox system
II.Utilizing zero-balance accounts
III.Depositing checks daily rather than weekly
IV.Reducing the processing delay by one day

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, II, and III only
D)  I, III, and IV only
E)  I, II, III, and IVF) A) and E)
G) A) and C)

Question 18

A firm uses the extended economic order quantity approach to inventory management.Which one of the following inventory levels is considered to be the minimum inventory level given this approach?

Accepted Answer

A)  Zero inventory
B)  Reorder point level
C)  Safety stock level
D)  50 percent of the reorder quantity
E)  Safety stock plus the reorder quantityF) B) and D)
G) A) and E)

Question 19

A firm offers credit terms of 1/5,net 25.How long is the net credit period?

Accepted Answer

A)  1 day
B)  5 days
C)  20 days
D)  25 days
E)  30 daysF) A) and E)
G) B) and C)

Question 20

LaDoris & Mike,Inc.sells earnings forecasts for Chinese securities.Its credit terms are 1/5,net 15.Based on experience,85 percent of all customers take the discount.What is the average collection period?

Accepted Answer

A)  6.0 days
B)  6.5 days
C)  7.0 day
D)  7.5 days
E)  8.0 daysF) A) and B)
G) None of the above

Exam 17: Working Capital Management

Which one of the following is the process of determining the probability that customers will not pay?

Correct Answer
verified

You have $175,000 on deposit with no outstanding checks or uncleared deposits.One day you write a check for $18,000.What is your book balance?

Correct Answer
verified

A firm uses the extended economic order quantity approach to inventory management.Which one of the following inventory levels is considered to be the minimum inventory level given this approach?

Correct Answer
verified

LaDoris & Mike,Inc.sells earnings forecasts for Chinese securities.Its credit terms are 1/5,net 15.Based on experience,85 percent of all customers take the discount.What is the average collection period?

Correct Answer
verified

Which one of the following reports will tell me the percentage of accounts receivable that are delinquent by 90 days or more?

Correct Answer
verified

Faith wrote a check for $22 on Friday,May 6.The check cleared the bank on Wednesday,May 11.There were no other checks or deposits outstanding during the month.Given this,which one of the following statements is correct?

Correct Answer
verified

Which one of the following refers to a customer's willingness to meet his or her credit obligations?

Correct Answer
verified

What is the primary purpose of a cash discount?

Correct Answer
verified

Correct Answer
verified

Draw a basic flowchart that depicts the components of collection time.Be sure to label all key points and explain the various components.In addition,offer one suggestion for decreasing the time required for each component.

Correct Answer
verified
Students should replicate the time line ...
View Answer

Correct Answer
verified

Which one of the following is most commonly used in international trades?

Correct Answer
verified

Correct Answer
verified

Which one of the following is the most ethical practice related to cash disbursement management?

Correct Answer
verified

A firm offers credit terms of 1/5,net 25.How long is the net credit period?

Correct Answer
verified

Which of the following practices will reduce a firm's collection float? I.Installing a lockbox system II.Utilizing zero-balance accounts III.Depositing checks daily rather than weekly IV.Reducing the processing delay by one day

Correct Answer
verified

The checks received in a lockbox are deposited:

Correct Answer
verified

On June 22,Roy's Welding Shop purchased $3,300 worth of goods.The terms of the sale were 1/7,net 21.What is the effective annual rate of interest for the credit period for this sale?

Correct Answer
verified

Laurie's Ice Rink keeps an extra $1,500 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?

Correct Answer
verified

On April 14,McCallister's purchased $10,000 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _ and the effective annual rate is _ percent.

Correct Answer
verified

Exam 17: Working Capital Management

Which one of the following is the process of determining the probability that customers will not pay?

Correct AnswerverifiedShow Answer

You have $175,000 on deposit with no outstanding checks or uncleared deposits.One day you write a check for $18,000.What is your book balance?

Correct AnswerverifiedShow Answer

A firm uses the extended economic order quantity approach to inventory management.Which one of the following inventory levels is considered to be the minimum inventory level given this approach?

Correct AnswerverifiedShow Answer

LaDoris & Mike,Inc.sells earnings forecasts for Chinese securities.Its credit terms are 1/5,net 15.Based on experience,85 percent of all customers take the discount.What is the average collection period?

Correct AnswerverifiedShow Answer

Which one of the following reports will tell me the percentage of accounts receivable that are delinquent by 90 days or more?

Correct AnswerverifiedShow Answer

Faith wrote a check for $22 on Friday,May 6.The check cleared the bank on Wednesday,May 11.There were no other checks or deposits outstanding during the month.Given this,which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Which one of the following refers to a customer's willingness to meet his or her credit obligations?

Correct AnswerverifiedShow Answer

What is the primary purpose of a cash discount?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Draw a basic flowchart that depicts the components of collection time.Be sure to label all key points and explain the various components.In addition,offer one suggestion for decreasing the time required for each component.

Correct AnswerverifiedStudents should replicate the time line ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is most commonly used in international trades?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is the most ethical practice related to cash disbursement management?

Correct AnswerverifiedShow Answer

A firm offers credit terms of 1/5,net 25.How long is the net credit period?

Correct AnswerverifiedShow Answer

Which of the following practices will reduce a firm's collection float? I.Installing a lockbox system II.Utilizing zero-balance accounts III.Depositing checks daily rather than weekly IV.Reducing the processing delay by one day

Correct AnswerverifiedShow Answer

The checks received in a lockbox are deposited:

Correct AnswerverifiedShow Answer

On June 22,Roy's Welding Shop purchased $3,300 worth of goods.The terms of the sale were 1/7,net 21.What is the effective annual rate of interest for the credit period for this sale?

Correct AnswerverifiedShow Answer

Laurie's Ice Rink keeps an extra $1,500 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?

Correct AnswerverifiedShow Answer

On April 14,McCallister's purchased $10,000 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Students should replicate the time line ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

On April 14,McCallister's purchased $10,000 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _ and the effective annual rate is _ percent.

Correct Answer
verified